The Age of Your Small Business Could Help You Get a Business Loan

3 min read • Aug 02, 2016 • Tyler Heaps

Each stage of business ownership and growth requires funding. For example, you need seed capital if you’re only in the inception stages of business with not much yet beyond an idea. Then you’ll need early stage capital to develop your product, increase marketing, and improve efficiency. As your company shows signs of becoming profitable, your chances of attracting funding and obtaining a business loan will increase.

Most banks should be able to provide funding through the SBA guaranteed loan program. If they agree to consider your loan through the SBA loan program, they’ll forward your credit information and your application to the nearest SBA office for a decision.

If you have unstable finances, not-for-profit lenders and micro-lenders are two good funding choices. Small businesses in neighborhoods that are struggling economically are often given priority by not-for-profit lenders and micro-lenders, and many of them are also dedicated to assisting traditionally disadvantaged and minority entrepreneurs.

As your business grows, it will need additional funding. All is not lost, even if your credit cards are maxed out and your savings nonexistent. Consider asking friends and family to finance the business with the understanding that their capital may not be repaid. A reward to these investors would be a wonderful gesture once the business flourishes.

Crowd funding is gradually becoming popular as a method for people to get startup funding for their business ventures. With crowd funding, you literally attract a “crowd” of people, usually via a website such as Kickstarter or Indiegogo, by posting a proposal convincing them to each take a small stake in your business.

If yours is a technology-driven business, or it has high growth potential, you can seek funding from a venture capitalist. Some of the sectors that attract these lenders are communications, information technology, and biotech. Venture capitalists take an equity position in the business to assist it in carrying out promising, but high-risk projects.

Business Loans for the Takeoff Stage and Beyond

After the startup stage, a business enters the success stage, where the business owners have infused sufficient funds to achieve steady profits, and where they can choose to either increase their activities or start to extricate themselves from the day-to-day running of the company and allow it to support them. If you’re at the takeoff stage, this may be the time to get an equipment loan to expand what you presently offer or a business loan to purchase a second business or franchise.

The success stage leads directly to the takeoff stage, where you transition from being a small business. Your access to small business loans will improve because by this stage you would have proven yourself as a key player in your industry. You can also use non-traditional sources of funding such as factoring or accounts receivable financing to fund your growth.

You can also seek help from a venture capitalist to move your company forward through the takeoff stage. Venture capitalists favor well-run businesses, with go-getting founders and managers who know their market and their product well. Most venture capitalists bring more than just capital, but also deep knowledge of operations and systems, perfect for a business at the takeoff stage.

As you navigate financing for your small business, you should keep in mind that if you opt for equity financing, where you give someone a share in your business in exchange for their capital, the more developed your business is, the more they should have to pay you for that share. That goes for venture capitalists or any other type of investor.

After the takeoff stage, the business enters the maturity stage, where it is now at the top of its market. The business is a lucrative, fine-tuned system at this stage, and your attention should be focused on managing the profits. At this stage, the decision to take a business loan should not be out of pure necessity, but rather it should be based on what’s best for the company at the time.

Plowing profits into technology or expanding into new service lines or products will require renewed commitment and financing. Whatever source of funding you ultimately choose, it’s good to know that alternatives to the traditional business loan exist, and can be accessed at any time in the lifecycle of your business.


Tyler Heaps

Tyler is a member of the Lendio marketing team. He is passionate about digital marketing, small business, and helping small business owners succeed. Tyler is an outdoorsman and loves spending time with his family.